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Derivative Instruments and Hedging Strategies | 9 Months Ended
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Jun. 30, 2012
Derivative Instruments and Hedging Strategies [Abstract] |
DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES | H. DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES We operate in various countries and have operations in the United Kingdom and Canada. These international operations expose us to market risk associated with foreign currency exchange rate fluctuations. We have entered into certain forward contracts to hedge the risk of certain foreign currency rate fluctuations. To the extent we choose to manage volatility associated with the net exposures, we enter into various financial transactions which we account for using the applicable accounting guidance for derivative instruments and hedging activities. Our objective is to hedge the variability in forecasted cash flow due to the foreign currency risk associated with certain long-term contracts. As of June 30, 2012, we held only derivatives that were designated as cash flow hedges related to the U.S. Dollar/British Pound Sterling exchange rate. All derivatives are recognized on the Condensed Consolidated Balance Sheet at their fair value and classified based on the instrument’s maturity date. The total notional amount of outstanding derivatives as of June 30, 2012 was $0.7 million. The following table presents the fair value of derivative instruments included within the Condensed Consolidated Balance Sheets as of June 30, 2012:
|  | Asset Derivatives |  |  | Liability Derivatives |
|  | Balance Sheet Location |  | Fair Value |  |  | Balance Sheet Location |  | Fair Value |
|  | (in thousands) |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange forwards |  | Prepaid expenses and other current assets |  | $ | 10 |  |  | Other accrued expenses |  | $ | — |
Total derivatives |  |  |  | $ | 10 |  |  |  |  | $ | — |
There were no derivatives outstanding at September 30, 2011. The following table presents the amounts affecting the Condensed Consolidated Statements of Operations for the three and nine month periods ended June 30, 2012:
|  | Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives |  |  |  |  | Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income |
Derivatives designated: |  | Three Months Ended June 30, 2012 |  |  | Nine Months Ended June 30, 2012 |  |  | Location of Gain (Loss) Reclassified from Accumulated Other comprehensive Income into Income |  | Three Months Ended June 30, 2012 |  |  | Nine Months Ended June 30, 2012 |
|  | (in thousands) |  |  |  |  | (in thousands) |
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange forwards |  | $ | — |  |  | $ | — |  |  | Revenues |  | $ | 12 |  |  | $ | 11 |
Total designated cash flow hedges |  | $ | — |  |  | $ | — |  |  |  |  | $ | 12 |  |  | $ | 11 |
The following table presents the amounts affecting the Condensed Consolidated Statements of Operations for the three and nine month periods ended June 30, 2011:
|  | Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives¹ |  |  |  |  | Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income¹ |
Derivatives designated: |  | Three Months Ended June 30, 2011 |  |  | Nine Months Ended June 30, 2011 |  |  | Location of Gain (Loss) Reclassified from Accumulated Other comprehensive Income into Income |  | Three Months Ended June 30, 2011 |  |  | Nine Months Ended June 30, 2011 |
|  | ( in thousands) |  |  |  |  | (in thousands) |
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange forwards |  | $ | (14 | ) |  | $ | (19 | ) |  | Revenues |  | $ | 3 |  |  | $ | 45 |
Total designated cash flow hedges |  | $ | (14 | ) |  | $ | (19 | ) |  |  |  | $ | 3 |  |  | $ | 45 |
¹ | For the three and nine month periods ended June 30, 2011, we recorded in revenues an immaterial amount of ineffectiveness from cash flow hedges.
Refer to Note B for a description of how the above financial instruments are valued in accordance with the fair value measurement accounting guidance for the three and nine month periods ended June 30, 2012. Cash Flow Hedges The purpose of our foreign currency hedging activities is to protect us from the risk that the eventual cash flows resulting from transactions that are denominated in currencies other than the U.S. Dollar will be adversely affected by changes in exchange rates. We are currently hedging our exposure to the reduction in value of forecasted foreign currency cash flows through foreign currency forward agreements through October 31, 2012, for transactions denominated in the British Pound Sterling. All changes in the fair value of outstanding cash flow hedge derivatives, except the ineffective portion, are recorded in accumulated other comprehensive income, until net income is affected by the variability of cash flows of the hedged transaction, or until it is probable that the forecasted transaction will not occur. In most cases, amounts recorded in accumulated other comprehensive income will be released to net income some time after the maturity of the related derivative. The Condensed Consolidated Statements of Operations’ classification of effective hedge results is the same as that of the underlying exposure. Results of hedges of revenue and product costs are recorded in revenue and costs of sales, respectively, when the underlying hedged transaction affects net income. Results of hedges of selling and administrative expense, if any, are recorded together with those costs when the related expense is recorded. In addition, any ineffective portion of the changes in the fair value of the derivatives designated as cash flow hedges are reported in the Condensed Consolidated Statements of Operations as the changes occur. As of June 30, 2012, there were no deferred net losses (net of tax) on outstanding derivatives recorded in accumulated other comprehensive income expected to be reclassified to net income during the next 12 months as a result of underlying hedged transactions being recorded in net income. Actual amounts ultimately reclassified to net income are dependent on the exchange rates in effect when the derivative contracts that are currently outstanding mature. As of June 30, 2012, the maximum term over which we are hedging exposure to the variability of cash flows for our forecasted and recorded transactions is four months. For the three and nine months ended June 30, 2012, we recorded in selling, general and administrative expense an immaterial amount of ineffectiveness from cash flow hedges. Credit Risk We are exposed to credit-related losses in the event of non-performance by counterparties to hedging instruments. In recent years, the ability of financial counterparties to perform under financial instruments has become less certain. We attempt to take into account the financial viability of counterparties in both valuing the instruments and determining their effectiveness as hedging instruments. If a counterparty was unable to perform, our ability to qualify for hedging certain transactions would be compromised and the realizable value of the financial instruments would be uncertain. As a result, our results of operations and cash flows would be impacted.

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- Definition The entire disclosure for the entity's entire derivative instruments and hedging activities. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80784-113994 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624181-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708775-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579245-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41641-113959 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579240-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41635-113959 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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